3 Steps to a Winning Forex System for Day Traders

By : Aaron Stokes
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If you want to be one of the best in Currency Trading then you'll need a system that is iron-clad. Most people will not grow their accounts, unfortunately the majority will lose their funds to other more successful traders. If you want to win you need a system that is a few notches better than the rest, let's take this moment to find out how to develop just such a system.

A trading system is a simple way of saying, how does a forex trader decide when to enter or exit the market and how much leverage should he use on each trade. There are 3 elements to a successful trading system. The trade entry timing, trade exit timing and deciding on the proper leverage. When determining the over all value of our system we will be monitoring these 3 properties.

1 - When to enter the market

The quality of your system is going to be reflected by the amount of time you as a professional Forex trader are willing to commit to trading your system. For instance, if you are generally available during the hours of 8am to 4pm then it would not be logical to develop a system which enters during the hours of 2am to 6am. Deciding on which hours you are willing to commit towards trading Forex will determine the quality of trades you make on a regular basis. It is also going to influence the quality of life you live on a daily basis. Needless to say there are countless traders who spend nearly 24 hours a day watching their monitors in fear that they will miss the next big move. This is not how I would describe a high "quality of life" and this is definitely not the path towards becoming a reputable trader. If you have experienced chart gazing for more than 10 hours straight then you know what I say is true. Your trade entry times must be comfortable for you to implement into a leisurely lifestyle.

2 - Exiting the market

Once you have entered a trade you should already have an exit strategy in place. This strategy on when to exit can include variables such as duration: I will exit position after 10 hours whether in profit or loss. Your exit strategy may also be price based: I will exit position when either a profit of 15 pips is reached, or a loss of 15 pips is reached. A combination of the above two mentioned criteria can be used. A number of other exit strategies including the use of technical and fundamental indicators can also be used, however the important thing to keep in mind is that an exit strategy must be in place before ever entering into a trade. This is not improvisational trading and your goal is not to constantly invent and reinvent the proverbial "traders wheel" so to speak. If your goal is to become a reputable Forex trader you need to make a plan before you enter the market and dedicate yourself towards sticking to it. Follow this principle and trading success will be right around the corner.

3 - Use proper leverage

No table can stand on 2 legs alone, leverage is undoubtedly the essential 3rd leg to any successful trading system. As a Forex trader knowing how much leverage to use on any given trade can be the life or death of your account. On any given trade you should have firmly established criteria which will determine how many lots you will use. For instance many fall into the trap of adding or decreasing their position size at the spur of a moment simply because they have the fleeting feeling that something good or bad is about to happen. These two actions when carefully planed ahead of time may be sound in strategy, however it is essential that your trading rules are written before your trade is placed. It just cannot be emphasized enough, emotional trading will lead to disaster. Emotional trading will cause you to increase or decrease your leverage based on how you feel in the moment, and in that moment your emotions will trick you into throwing your entire trade plan out the window. By creating a plan which includes when to enter, when to exit and how much leverage to use you will become free to execute your trades without the fear that your emotions will get in the way. This is how expert Forex traders move around in the market.

The benefits are far reaching, once you have learned to stick to your plan you are free to begin experiencing the emotions that come with being a successful trader. Emotions are not your enemy, they only become your enemy when you allow them to influence your strategy. A reputable Forex trader is not a zombie, or a machine that turns out trades without thinking or blinking; the goal of every Forex trader is to create a lifestyle which promotes an inner sense of accomplishment. By sticking to the above 3 points you will find a new path unfolds before you, one which will lead you to Forex trading success.

About the author:
An expert Forex trader managing accounts internationally, Aaron Stokes brings guidance to Currency Traders sharing his insights on topics such as leverage, system development and technical analysis. His managed Forex program offers returns in excess of 10% per month. Aaron Stokes is currently ranked in the top 10 on Google.com For more information visit: forex-cipher.com" target=_blank>http://www.forex-cipher.com